Customer Lifetime Value
The total revenue a business can expect from a single customer account over the entire duration of their relationship.
In Depth
Customer Lifetime Value (CLV or LTV) is a prediction of the total revenue a business will earn from a customer over the entire span of their relationship. CLV is calculated using various methods: historical CLV (sum of past revenue from a customer), predictive CLV (using statistical models to forecast future revenue), and simplified CLV (average revenue per customer × average customer lifespan). A common formula is CLV = (Average Revenue Per User × Gross Margin) / Churn Rate. CLV is essential for determining how much to spend on customer acquisition (CAC), which customer segments are most valuable, and where to focus retention efforts. A healthy business typically has a CLV:CAC ratio of 3:1 or higher.
How AI for Database Helps
AI for Database calculates CLV from your customer and billing data, segmented by plan, acquisition channel, or any other dimension.
Related Terms
Churn Rate
The percentage of customers or subscribers who stop using a product or service during a given time period.
Customer Acquisition Cost
The total cost of acquiring a new customer, including marketing, sales, and onboarding expenses.
MRR
Monthly Recurring Revenue—the predictable total revenue generated from all active subscriptions in a month.
Retention Analysis
The measurement of how many users continue to use a product or service over time.
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